- Learn How Your Business Can Pay For Your Insurance...
- The New Health Insurance - Avoid Diabetes And Hear...
- Why Do I Need Medical Coverage On My Car Insurance...
Learn How Your Business Can Pay For Your Insurance And Medical Expenses
If you are self-employed, your income is subject to a 15.3% self-employment FICA tax. Added to a 28% Federal income tax and a 5% state income tax, this could leave you paying nearly 50% of your income to the government. Fortunately, most self-employed people qualify to set up an HRA or Health Reimbursement Arrangement. An HRA can enable your business to reimburse you for health insurance and out-of-pocket medical expenses, and will save you an extra $3,000 each year.
Health Reimbursement Arrangements for the Self-Employed
An HRA is simply an agreement which enables your business to cover employee's medical expenses, including individual health insurance premiums, as a tax-free fringe benefit. This tax benefit was established in Section 105 of the IRS tax code in 1955, when General Electric lobbied for a business reimbursement rule to give it more flexibility in creating employee benefits.
Anyone set up as an S-corp or C-corp qualifies to set up an HRA. If you are a Schedule C or Schedule F sole proprietor, an HRA is allowed if your spouse can work at least part time in the business. You will be setting up an employee benefits package that covers health insurance premiums, disability insurance premiums, long-term care premiums, and even out-of-pocket medical expenses such as dental coverage.
An HRA makes your taxes go down because when you get to write off medical expenses on your Schedule C, you avoid paying Federal income taxes, state income taxes, and the 15.3% FICA self-employment tax. Not only can the business reimburse you for the cost of health insurance premiums, but you can also set up the HRA to reimburse for dental coverage, preventive care, disability insurance, long-term care insurance, and other out-of-pocket medical expenses.
If you are self-employed but do not have an HRA, you can write off your health insurance premiums on your 1040, saving you Federal income taxes. But, you are still subject to FICA and state income taxes for these expenses. You are not able to write off any of the other expenses listed above.
Using an HRA with a Health Savings Account
Some financial advisors do not realize that you can have an HRA along with a Health Savings Account (HSA). You can of course. The only caveat is that the HRA cannot reimburse for expenses that could apply toward the deductible of the HSA, such as doctor visits or prescription drugs. But, it can cover any insurance premiums and preventive care.
The potential savings are substantial. Let's assume a business owner is in a 28% tax bracket, has an HSA plan, and is incurring the following expenses.
•Health insurance premiums - $7,000
•Preventive expenses - $1,000
•Other insurance - $2,000
The self-employed business owner can write off the $7,000 premium on Federal income taxes, saving 28% of that or $1,960. If the HSA is fully funded, an additional $1,582 will be saved off of Federal income taxes and $282.50 from state income taxes. So, in total, the business owner’s taxes will go down by $3,824.50.
Once an HRA is set up, the entire $10,000 in expenses listed above can be reimbursed by the business. So, the business owner would be saving a total of $2,800 from Federal income taxes, $500 from state income taxes, and $1,530 in self-employment taxes. The business owner will also get to take advantage of the same $1,960 in HSA tax savings, for a total tax reduction of $6,790.
Smart business owners take advantage of all the tax deductions for which they qualify. You can reimburse health insurance expenses from the beginning of the year, but out-of-pocket expenses only from the date your HRA begins.
The New Health Insurance - Avoid Diabetes And Heart Disease So Your Medical Retirement Acct Grows
It is now estimated the average couple will need over $200,000 in retirement just to cover medical expenses. Health Savings Accounts are now giving people serious incentives to take care of their health so that money will be there when they need it in old age.
Health Savings Accounts are tax-favored accounts where someone with a qualifying high-deductible health plan can deposit money to be used for future medical expenses. The money can be withdrawn any time to pay medical expenses tax-free. Those who stay healthy and don't withdraw the money benefit from tax-deferred growth, just like with an IRA.
Many experts now believe that 85-90% of all health problems are self-induced, and can be easily avoided if you understand how. By avoiding the most common diseases that affect modern Americans, you can delay having to take money out of your HSA, and take great advantage of the tax-deferred growth. Over a 20 year period, tax-deferred growth and tax-free use of your money to pay medical expenses during retirement could yield a 30% better return than a taxable investment.
Metabolic Syndrome: The Preventable Diseases That Almost Everyone Gets
One out of every five Americans, 45% of those in their 60's, and two-thirds of overweight people have metabolic syndrome. An astounding 70% of Americans have at least one symptom.
The symptoms of metabolic syndrome include elevated fasting blood sugar, high LDL cholesterol, elevated triglycerides, low HDL cholesterol, and a waist circumference of 34 inches or more. Three of the top five causes of death - diabetes, cancer, and cardiovascular disease - are all related to metabolic syndrome. Metabolic syndrome could also be thought of as "pre-diabetes". Of the cancers, prostate and breast cancer are particularly correlated with metabolic syndrome. And metabolic syndrome will soon overtake cigarette smoking as the number one risk factor for cardiovascular disease.
Yet the diseases of metabolic syndrome are almost entirely preventable by simply eating a good diet, exercising, and maintaining a normal body weight. Do so, and you avoid paying for the medications that everyone else is taking. Even more importantly, you avoid the surgery, hospitalization, rehab, and all the other expenses that come with a heart attack, stroke, colon cancer, and other related health problems.
If you are withdrawing several hundred dollars a year from your HSA to pay for cholesterol medication and blood pressure medication and other drugs, you're going to have a difficult time growing the account. But if you stay healthy, and invest most of your money in a good mutual fund, you could easily accumulate over $500,000 in a 25 year period.
HSAs reward personal responsibility. Those who save for the future and maintain healthy lifestyle habits will be rewarded with both health and wealth in their old age.
Why Do I Need Medical Coverage On My Car Insurance Policy?
So many times, people don't understand the need for medical coverage on their auto insurance policy. "Why do I need medical coverage?", they ask. "I have medical insurance." I'm glad they have medical insurance, but what about their passengers? Do they have medical insurance?
The medical coverage on your auto insurance provides medical coverage for both you, the driver, and each one of your passengers. It is a very cost effective way to pay for that ambulance ride to the hospital and to pay for the doctor exam. Many people don't realize that their medical insurance probably won't pay anything until the medical coverage from the car policy is exhausted!
Years back, a celebrated author in his get rich quick book advised us to minimize the medical coverage on our car insurance, or to drop it entirely. I would advise you to maximize it! Many health plans do not cover auto accidents until after the first fifty thousand dollars. My own plan does that, but for a modest extra $15 every month, it will pay after the first five thousand. No thank you! I'll pay the extra $15 to raise the medical coverage on my auto policy to $50,000, and spend that extra monthly $15 on something I'll enjoy.
Check it out. Have your insurance agent run the numbers, and I'm sure you'll be surprised
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